How does the personal loan EMI calculator work? An explainer

When you apply for a personal loan, one of the key decisions that you must take is to ascertain the loan instalment. Typically, loan EMI is a function of multiple factors which include the loan tenure and rate of interest.

As a new borrower, if you are still busy shopping for the right loan and are not sure as to which loan provider and which combination will give the most optimum deal to you -- it is recommended to use a personal loan EMI calculator. A calculator gives you the right calculation of monthly instalment based on different inputs entered. You can access the Livemint EMI calculator here.

Inputs required to enter in Loan EMI calculator

A. Loan amount: Naturally, the loan EMI is dependent on the amount of loan. It is directly proportional to the loan amount. This means higher the loan amount, higher the EMI. On the other hand, lower the loan amount, lower the monthly instalment.

B. Rate of interest: The second input that a borrower needs to enter in the personal loan EMI calculator is interest rate. This is inversely proportional to loan EMI. This means higher the personal loan interest rate, lower the EMI. And lower the interest, higher the instalment.

C. Loan tenure: Finally, the third factor which influences your loan EMI is the tenure of loan. This is inversely proportional to the EMI. In other words, longer the loan tenure, smaller the loan instalment. And shorter the loan tenure, bigger the loan instalment.

Illustration: For instalment, you took a ₹5 lakh loan at an interest rate of 11 percent, and the loan's tenure is 5 years. When you enter these inputs in the EMI calculator, it shows your EMI as ₹10,871. If you reduce the tenure from five years to four, the EMI rises proportionately to ₹12,922.

Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.